December 13, 2017 - 10:00am
We are pleased to announce the release of two new Berkeley Lab reports: (1) Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs; and (2) Power Plant Retirements: Trends and Possible Drivers. Both studies were initially prepared as input into the August 2017 DOE "Staff Report to the Secretary on Electricity Markets and Reliability." A free webinar summarizing key findings from the reports will be held on Wednesday, December 13, 2017 at 10:00 AM Pacific/1:00 PM Eastern. Register for the webinar here.
In the first study, Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs, which was conducted in collaboration with Argonne National Laboratory, we synthesize available literature, data, and analysis on the degree to which growth in variable renewable energy (VRE) like wind and solar power has impacted to date or might in the future impact bulk power system assets, pricing, and costs. We do not analyze impacts on specific power plants, instead focusing on national and regional system-level trends. The issues addressed are highly context dependent, and analyzing the impacts of VRE is complex. While more analysis is warranted, including additional location-specific assessments, several high-level findings emerge from this assessment:
(1) VRE Is Already Impacting the Bulk Power Market: The temporal and geographic patterns in wholesale prices have changed in some areas with higher penetrations of VRE, e.g. in CAISO and ERCOT. Negative prices have also sometimes increased with VRE penetration, though the prevalence of negative pricing remains limited in most locations. For the nation as a whole, negative prices have concentrated in areas with significant VRE and/or nuclear generation along with limited transmission, with negative pricing typically occurring during periods of lower system-wide load.
Figure 1. Frequency of Negative Wholesale Electricity Prices in the Real-Time and Day-Ahead Markets at Several Major Trading Hubs
(2) VRE Impacts on Average Wholesale Prices Have Been Modest: Analysis of wholesale prices in several regions demonstrates that the impact of VRE on average annual, region-wide wholesale prices has been limited so far. Since 2008, the dominant factor driving wholesale prices lower has been the declining price of natural gas, with VRE playing a comparatively modest role overall.
Figure 2. Estimated Contribution of Various Drivers to the Observed Decline in Average Wholesale Electricity Prices in ERCOT and CAISO
(3) VRE Impacts on Power Plant Retirements Have So-Far Been Limited: Given the relatively modest impact so far of VRE on average annual region-wide wholesale electricity prices, it is not surprising that we do not find evidence of a widespread impact of VRE on power plant retirements. While VRE impacts on electricity markets may be a contributor to retirement decisions for some specific units, to date there is little relationship between the location of recent (2010-2016) coal, nuclear, and other thermal retirements and VRE penetration levels.
Figure 3. Relationship between VRE Penetration and Recent Retirements
(4) VRE Impacts on the Bulk Power Market will Grow with Penetration: A review of modeling results from different studies of electricity markets in the United States demonstrates that higher penetrations of VRE will tend to: (1) prioritize flexible (both existing and new) and low-capital cost generation units over less-flexible and high-capital cost units; (2) require greater amounts of aggregate capacity (including VRE and non-VRE capacity), flexibility, and reserves to manage reliability; (3) alter the temporal and geographic patterns of wholesale electricity prices, and (4) reduce wholesale electricity prices and potentially increase ancillary service prices, especially before capacity equilibration occurs over the longer term.
Figure 4. Projected Wholesale Electricity Prices with Increasing VRE Penetrations
(5) The 'System Value' of VRE will Decline with Penetration: The system value of VRE-specifically, the ability of VRE to offset the cost of other bulk power system assets-will tend to decline on the margin as VRE penetrations increase. These declines result from changes in the energy and capacity values of VRE, and the changing need for balancing services and transmission capacity. Comparing resources based only on their levelized cost of energy does not adequately capture differences in contributions to system value or system costs.
6) Power System Flexibility Can Reduce the Rate of VRE Value Decline: Flexibility provided by generation, load, transmission, storage, operational procedures, and market design become more important with VRE. Such flexibility measures reduce the rate of decline in system value of VRE as penetrations increase, but sometimes come at a cost to the consumer that is not always fully accounted for when planning future generation portfolios.
In the second study, Power Plant Retirements: Trends and Possible Drivers, we compile and assess available data on historical and planned thermal power plant retirements. This basic data synthesis highlights trends and correlation between different potential drivers, but it is not intended to precisely estimate their relative magnitude. Nor do we explore every possible driver for retirement decisions. Moreover, future retirement decisions may be influenced by different factors than those that have affected past decisions.
Nonetheless, we find that coal and natural gas plants that are retiring to date generally tend to be older, smaller, less efficient, and more emitting than the remaining fleet. These differences remain for plants that are scheduled to retire, though moderated to some degree. Based on simple correlation graphics, the strongest predictors of regional retirement differences appear to include SO2 emissions rates (for coal), planning reserve margins (for all thermal units), variations in load growth or contraction (for all thermal units), and the age of older thermal plans (for all thermal units). Additional apparent predictors of regional retirements include the ratio of coal to gas prices and delivered natural gas prices. Other factors appear to have played lesser roles so far, including VRE penetration, recent non-VRE capacity additions, and whether the region hosts an ISO/RTO.
The first study, "Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs", can be downloaded here. The second, shorter assessment, "Power Plant Retirements: Trends and Possible Drivers", can be downloaded here. The free webinar summarizing key findings from the reports will be held on Wednesday, December 13, 2017 at 10:00 AM Pacific/1:00 PM Eastern. Register for the webinar here.
We appreciate the funding support of the U.S. Department of Energy in making this work possible.